Facebook is testing a new advertising system, heavily based on visitors’ web browsing habits, to provide more relevant direct ads to its members.

The program, called Facebook Exchange, will allow third-party platforms to place retargeting ads on Facebook after members visit external websites marked with cookies. Retargeting works by keeping track of people who visit your site and showing your ads to them as they visit other sites.

When an individual visits a site that is enrolled in the program, a cookie will be placed on his or her browser when he or she reaches a stage that implies purchase intent. For example, a travel site could serve ads about a flight to Hawaii to someone who almost purchased a flight on its site.

If that person doesn’t complete a transaction, the partner platform will be able to bid on retargeting ads that appear on the social network when he or she visits Facebook again. The goal is to bring that individual back to your site to complete a purchase.

The Exchange Program is currently being tested with eight advertising demand-side platforms (DSPs), such as TellApart, AppNexus, AdRoll and more. In the next few weeks it will be made available for traditional Facebook sidebar ads, but not Sponsored Stories or mobile.

While this might rattle some members — some people just dislike being targeted — Facebook ensures that advertisers won’t be able to combine cookie retargeting with any biographical, social, or behavioral data related to its members.

Additionally, Facebook members will be able to opt out of the Exchange program through third-party DSPs; however, they’re unable to opt out of the program completely from the social network.

It’s possible that traditional Facebook advertisers will see increased bid prices as DSPs — which are likely willing to pay more money — compete for ad inventory.

[Via: TechCrunch, Image credit: bk1bennett]